What is a cash book?

The cash represents the most liquid asset of a company. Companies use the cash to pay bills to creditors and take advantage of financial opportunities. Companies receive cash payments from their customers. The cash account experiences high number of transactions during a period because of the many cash receipts and disbursements that occurs during such period. A cash book gives detailed information regarding the cash transactions of a company.

Cash Book – Subsidiary ledger:

Companies use a ledger and its subsidiary to track financial transactions. The ledger contains information for each account that the company uses. The ledgers provide detailed information about specific accounts. A cash book represents a type of Subledger or Subsidiary ledger. Subledger tracks the information of different cash accounts. These accounts can be segregated based on the bank account or individual locations.

Cash Book – Specific accounts:

Some companies have many bank accounts. Each bank account can be used to control specific functions in the company. An account can be used exclusively for payment of payroll, while another could be used for purchases of inventory. A cash book keeps separate lists of transactions and balances for each bank accounts. When the company makes a payment (or receive deposits) to a particular account, payment is recorded in the cash book corresponding to the account.

Cash Book – Specific location:

Some companies maintain separate cash accounts for its branches. Each cash account is used to control the cash transactions of a specific location. The cashbook maintain a separate list of transactions and balances for each location. When a branch makes a payment or register a deposit, the transaction is recorded in the book account corresponding to the specific location.

Cash Balance

The sum of each cash books should be equivalent to the total amount of cash registered in the general cash ledger of a company . At the end of the month, the company reviews each of the cash accounts and reconciles cash balance with the documentation that supports it. This documentation includes bank statements, deposit slips and canceled checks. After reconciling each cash book, the company adds the balance of each account and compares it against the balance of the account more effectively. Any discrepancies will then be investigated.